TIDM56TE
RNS Number : 0094L
Sovereign Housing Capital Plc
31 August 2023
Sovereign Housing Association's Quarterly Performance Update
covering Q1 year 2023/24
2022/23 Full year overview
Sovereign delivered another strong set of results for the year
end 31 March 2023, despite the ongoing impact of the cost-of-living
crisis and challenging economic headwinds. We achieved an operating
surplus of GBP123.9m, 28% operating margin and an overall surplus
of GBP66m, which is reinvested into homes and communities.
Capital expenditure included GBP303m in new homes, higher than
both 2021/22 (GBP237m) and 2020/21 (GBP216.5m) with 1672 new homes
completed and an additional GBP135.5m invested in our existing
homes.
Quarter 1 Performance Update -period to 30 June 2023
Sovereign have made a strong start to the year with our
unaudited management accounts for Q1 2023/24 showing operating
surplus and overall surplus considerably higher than Q4 last year,
t his is driven by the increase in Rent and service charge income
in Q1 and by high levels of repairs and compliance, legal and
transformation spend that occurred in Q4 FY23.
There is a drop in overall surplus from the previous year's
quarter driven mainly by higher funding costs due to increases in
interest rates.
Q1 FY24 Q4 FY23 variance Q1 FY23 variance
GBPm GBPm GBPm GBPm GBPm
Turnover 115.2 108.7 6.5 5.9% 113.8 1.4 1.2%
Operating Surplus 39.1 22.9 16.2 70.9% 37.9 1.2 3.1%
Retained Surplus 21.7 5.3 16.4 306.5% 24.2 (2.5) (10.2%)
units units units units units
Sales 181 106 75 70.8% 152 29 19.1%
Unit Completions 335 506 (171) (33.8%) 339 (4) (1.2%)
The development programme handed over 335 units during the past
quarter. This is a drop on Q4 because many units were delivered
early in Q4, making a good end to 22/23
The forward development programme equates to 5 years' worth of
delivery.
Treasury and Golden Rules
Sovereign operates within a number of Financial Golden Rules
that underpin treasury and risk management activity. A summary is
shown below. Instantly available financing has decreased from
GBP424m last quarter to GBP367m (equating to 24 months of forecast
liquidity), however this will increase as finalise discussions with
lenders and enter into new funding arrangements.
There is significant headroom against Interest Cover and Gearing
Golden Rules, creating protection against underlying debt facility
covenants. The performance metrics below show operating margin
slightly lower though resilient given the current economic
environment, against a threshold which is set at the upper quartile
of the Housing Association sector. We do not expect this to recover
in the short term as this is driven by the combination of capped
rents and continued cost pressures the business is experiencing
across our property services, as well as increased spend in our
Transformation programme. This programme will support longer term
performance improvement of the business.
Protection Actual Trend Threshold Headroom Definition
principle
Liquidity 24 months 18 months 6 months 18 months as a minimum,
where available cash
plus committed and
ready-to-draw borrowing
facilities (excluding
retained bonds) must
exceed forecast cash
flows excluding all
uncommitted development
spend and all income
from development
sales and asset sales.
---------- ------ ---------- --------- ----------------------------
Sales / turnover
Market risk 17.6% - 40% 22.4% %
---------- ------ ---------- --------- ----------------------------
Operating surplus
(excluding all development
Performance and asset sales)
(Op surplus / turnover on rolling
%) 26.4% 30% -3.6% three year basis
---------- ------ ---------- --------- ----------------------------
10% minimum level
of headroom against
121% 82% all lenders' interest
Sustainability cover covenants
- Interest
Cover 223.3% 110% 74% Tightest covenant
---------- ------ ---------- --------- ----------------------------
5% minimum headroom
against all lenders'
76% 17.7% gearing covenants
Sustainability
- Gearing 48.3% ^ 80% 21.7% Tightest covenant
---------- ------ ---------- --------- ----------------------------
ESG
We continue to make good progress in improvements of our
existing core stock moving from 70.3% EPC C at March 2023 to 71.2%
as at June 2023. 24.6% of our core stock is at EPC B or better and
an overall average RdSAP score of 73.426.
With a number of pilot schemes completing next year and our
successful application for GBP9.4m of SHDF funding we expect to
make strong progress on our journey towards net zero.
We continue to work with Inspired energy, and we expect to be
able to share our scope 1,2 and 3 emissions and our FY23 ESG report
by October 2023.
Corporate Affairs
At the Housing 2023 Conference in Manchester in the last week of
June Sovereign had a strong presence. CEO Mark Washer spoke on the
main stage in a session with the Regulator of Social Housing. Chief
Customer Officer Nicole Sharp spoke on a panel on complaints and
Director of Built Environment Jim Dyer spoke on a panel on
retrofitting.
Ahead of Lisa Nandy's (Shadow Secretary of State for
Levelling-Up, Housing and Communities) speech to the conference,
Sovereign hosted a networking breakfast for more than fifty guests
from across the sector who heard from Mark Washer and enjoyed a
Q&A session led by Peter Apps from Inside Housing and Cllr
Jayne Francis, Cabinet Member for Housing and Homelessness,
Birmingham City Council on how the housing sector can work with the
Labour Party this side of the election and beyond.
S
For more information, please contact:
Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856 Graeme.Gilbert@Sovereign.org.uk
Charles Pitt, Corporate Affairs Director, Sovereign Housing
Association
07887524378 Charles.Pitt@Sovereign.org.uk
Disclaimer The information contained herein (the "Trading
Update") has been prepared by Sovereign Housing Association Limited
(the "Parent") and its subsidiaries (the "Group"), including
Sovereign Advances Ltd, Sovereign Housing Capital PLC (the
"Issuers") and is for information purposes only.
The Trading Update should not be construed as an offer or
solicitation to buy or sell any securities issued by the Parent,
the Issuers or any other member of the Group, or any interest in
any such securities, and nothing herein should be construed as a
recommendation or advice to invest in any such securities.
Statements in the Trading Update, including those regarding
possible or assumed future or other performance of the Group as a
whole or any member of it, industry growth or other trend
projections may constitute forward-looking statements and as such
involve risks and uncertainties that may cause actual results,
performance or developments to differ materially from those
expressed or implied by such forward-looking statements.
Accordingly, no assurance is given that such forward-looking
statements will prove to have been correct. They speak only as at
the date of the Trading Update and neither the Parent nor any other
member of the Group undertakes any obligation to update or revise
any forward-looking statements, whether as a result of new
information, future developments, occurrence of unanticipated
events or otherwise.
None of the Parent, any member of the Group or anyone else is
under any obligation to update or keep current the information
contained in the Trading Update. The information in the Trading
Update is subject to verification, does not purport to be
comprehensive, is provided as at the date of the Trading Update and
is subject to change without notice.
No reliance should be placed on the information or any
projections, targets, estimates or forecasts and nothing in the
Trading Update is or should be relied on as a promise or
representation as to the future. No statement in the Trading Update
is intended to be an estimate or forecast. No representation or
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Parent, any other member of the Group or any of their respective
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persons as to the accuracy or validity of the information or
opinions contained in the Trading Update (and whether any
information has been omitted from the Trading Update). The Trading
Update does not constitute legal, tax, accounting or investment
advice.
www.sovereign.org.uk/investors
Note: Figures quoted in the update are based on unaudited
management accounts which are subject to review and further
adjustments, for example in the areas of pensions, investment
property valuation and taxation.
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END
ACSPBMATMTJJBLJ
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